Hilton Expands Global Welcome Program for Chinese Travelers

by
Hilton Huanying welcome program to Chinese Travelers

Hilton Huanying (“Welcome” in Mandarin Chinese) program for Chinese Travelers

 

Hilton has just expanded its popular Huanying program to further cater to the growing Chinese traveler market and the guests’ evolving needs. Being the first global hotel brand to introduce a customized hospitality experience for Chinese travelers in 2011, the program (“Welcome” in Mandarin Chinese) has since served over one million Chinese globetrotters.

The program will now be rolled out to participating hotels under brands including Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts and DoubleTree by Hilton, altogether totaling 110 properties worldwide in over 30 countries and 65 cities, more than double the program’s initial scope both in participating hotels and geographical coverage.

In addition to the expansion of footprint, the program also sees further fine-tuning to enhance guest experiences in three signature hospitality touch points: the arrival experience, guest room amenities and the breakfast experience.

Arrival Experience – guests will be greeted with welcome notes in Simplified Chinese upon arrival. 24-hour Mandarin interpretation service is also provided, while many properties have Mandarin-speaking staff.

Guest Room Amenities – standard amenities include tea kettles, jasmine tea, slippers and dedicated Mandarin-speaking TV channels.

Breakfast Experience – this includes Chinese favorite menu items such as congee, fried rice/noodles, dim sum selection, Chinese tea, fresh fruit and soy milk and also culinary utensils like chopsticks, Chinese spoons and a soy sauce dish.

Hilton’s expansion of the Huanying program is a direct response to the ongoing Chinese outbound travel trend which has been growing at a breathtaking pace with the number of outbound Chinese travelers expected to double from 100M in 2014 to 200M by 2020.

Equally important as a decision factor for Hilton is the importance of brand awareness, particularly to the growing segment of Chinese independent travelers who show strong affinity to globally recognized brands. The custom services implemented are a direct result of its own extensive field research and those from third parties showing the types of amenities and experiences which are important to these travelers and which contribute greater overall satisfaction with the brand. (see also 2014 Chinese International Travelers Hotel Survey)

Source: Hilton Expands Welcome Program for Chinese Travelers Globally

5 Different Online Shopping Behaviors of Chinese Travelers

by

 

In just a few short years, the Chinese e-commerce market has grown to surpass that in the US to become the world’s biggest online retail marketplace. Nowhere was the consuming power of its citizens more fully illustrated than the recent Singles Day (Nov 11) shopfest on Alibaba’s e-commerce websites where $1 billion worth of goods was sold within the first opening 17 minutes and the total sales for the day reached $9.3 billion, an amount which eclipses the combined online sales of Black Friday and Cyber Monday in the US ($2.9 billion in 2013) by a huge margin (see China’s Consumer Power Unleashed – $9 Billion Singles Day Sales).

The emergence of this vast Chinese consumer market makes the understanding of its behavior a strategic imperative for companies and brands catering to the country’s domestic consumers as well as their outbound travelers. Though there are more similarities than differences between Chinese consumers and their Western counterparts, it pays to be aware of their differences in order to better cater to their needs.

Some of these nuances were highlighted by a recent report from Alibaba, China’s undisputed king of e-commerce with up to 80% share of the market. Although outlined within the context of the domestic market, a lot of these nuances are directly applicable to the outbound Chinese travel industry.

Online shopping adoption

Despite the much later introduction of e-commerce into China than in the West, its acceptance by Chinese consumers has been much faster. 75% of Chinese shop online weekly compared with a global average of 21%, according to a recent survey by PricewaterhouseCoopers.

In addition, mobile internet is quickly becoming the most important channel upon which online transactions are conducted. Thanks to the widespread adoption of smart phones, 75% of Chinese consumers said they have used their mobile phone to shop, compared with a global average of 43%, according to the same report. The fact that nearly half of all transactions on Alibaba’s e-commerce platform during the past Singles Day were mobile transactions is further proof of this behavior.

Understanding this behavior is all the more important for travel operators and activity providers, as a lot of activities are typically booked post arrival at the destinations. Having information and a booking mechanism which are easily accessible from a mobile device would go a long way in helping these travelers make their decisions.

Online Marketplaces over Standalone Shopping Websites

Whereas the bulk of e-commerce in the West is done on either websites established by traditional retailers or on pure-play e-commerce portals, about 90% of e-commerce is done in online marketplaces where there are thousands of virtual shops and other service providers such as delivery companies, according to the Alibaba report.

Although there might be an inherent bias in this assessment by virtue of Alibaba being the owner of many of these mega online marketplaces, the conclusion is probably not too far off the mark. In a country where counterfeit goods and consumer fraud are all too common, it would have been counter-intuitive that online shopping is as widely adopted as it has been, had it not been for the fact that the trusted brands of major e-commerce portals and built-in escrow based e-payment services provide the critical confidence boosting elements for consumers to shop there.

The same need for transactional safety is even more important for Chinese travelers contemplating an online purchase in a foreign country. Besides the well known OTAs, portals associated DMOs or formed by a collection of activity and service providers would provide the inspirational content, credibility, confidence and convenience for travelers to search for ideas and make their purchases online.

For well known destinations and established brands, standalone websites with a booking engine would also make economic sense.

Social Approval

Not only do Chinese consumers pay more attention to product recommendations from friends and online reviews, more netizens participate by posting product feedback. Combined with the high propensity for Chinese travelers to post on social media about their travels during and after the trips (see 4 Key Functions the Travel Industry Should Know about WeChat), it would not be difficult to conclude that social media presence is an indispensable pillar of engagement for hoteliers and activity providers alike.

Need More Assurance

In a similar logical vein to the low level of trust by Chinese consumers due to consumer frauds mentioned above, Chinese consumers typically demand relatively more information about the products and their vendors compared to shoppers in Western countries where consumer protection is more mature.

Good information about the service providers, the products and services they offered, logistical details, quality assurances, commonly asked questions and, ideally, customer service over the phone in their language would be a major differentiator which would help overcome the psychological barrier to conversion.

Less Emphasis on Bargain Hunting, More on Choice and Experience

While prices were the most dominant driver to shop online a few years ago, more and more Chinese consumers do so for better choice, quality and merchandise not available at local brick-and-mortar stores.

The same shift in consumer motivations is also reflected in the relative allocations of their spending while they travel overseas. Luxury travels are more common especially among FIT travelers who seek slower-paced, unique and deep experiences over the traditional whirlwind tours and shopping sprees.

 

China’s Consumer Power Unleashed – $9 Billion Singles Day Sales

by

 

AlibabaRight from the get-go, this day was destined to go into the history books as a shock-and-awe display of China’s consumer firepower.

The $1 billion milestone of merchandise sales on Alibaba’s group of retail platforms was reached when the clock at their corporate headquarters in Hangzhou struck 12:17 am – barely 17 minutes after midnight and into the day of Nov 11, China’s Singles Day, a day turned by the same company into a 24-hour shopfest of heavily discounted online sales.

By the end of the day, their digital cash registers rang in a cool $9.3 billion (57.1 billion RMB), handily smashing last year’s record of $5.8 billion.

To help grasp the relative size of that online sales figure, Americans spent $2.9 billion on Black Friday and Cyber Monday, the largest online sales days in the US – combined.

The 11.11 (Nov 11, or more popularly referred to as Double 11 locally) Shopping Festival involved 27,000 merchants and 42,000 brands selling on Alibaba’s group of e-commerce websites including Tmall.com, Tmall Global, Taobao Marketplace and AliExpress. It also involved other components of the ecosystem created around China’s largest e-commerce merchant, including Alibaba’s own e-payment provider Alipay and a consortium of shipping and delivery companies.

Nearly half of all transactions were performed via mobile devices, according to Alibaba.

Source:

Online Shopping Binge Gets Off to a Strong Start

 

2014 Chinese International Travelers Hotel Survey

by

 

The latest edition of the Chinese International Travel Monitor (CITM) report commissioned by Hotels.com TM contains a wealth of information on the traveling and accommodation booking habits of the Chinese outbound travelers.

Conducted during Apr/May 2014 with more than 3000 mainland Chinese residents who had paid for accommodation on an international trip as well as over 3000 of their hotel partners, the 60-page report provides valuable insights into not only the overall market but also various sub-segments, and is well worth a read in its entirety ( full report here ) especially for those who are in the trade. For those who are time challenged, here is a Readers Digest version for your light read.

Key findings

  • The rising affluence of the growing Chinese middle class will continue to drive towards higher aggregate number of outbound travelers for years to come. There is also growing confidence among these travelers, particularly the young, who have already experienced international travel and are more eager to venture beyond the tried-and-true destinations.
  • There are clear indications that Chinese travelers are moving towards independent travel (FIT) and away from group travel, particularly among the young. This is confirmed by two thirds of those surveyed who say they now prefer to travel independently and collaborated by 60% of hoteliers who experienced a boost in independent travelers in the past two years .
  • Chinese travelers are increasingly going online, particularly via mobile devices, to research and book their travels and then share their experiences via social media. Hoteliers are well advised to have a clear and executable online strategy to stay competitive in this market.

 

Background/context

97 million
traveled overseas from mainland China in 2013.

US$129 billion
total spend while traveling abroad.

618 million
internet users in China.

90%
internet users have at least one social media account.

 

Below are some stats to set the numerical context for the analysis.

  • 97 million Chinese traveled overseas in 2013. The number in the first three months of 2014 was up about 17%, leaving little doubt that the total yearly figure will surpass 100 million this year, according to Tourism Administration of China.
  • Chinese tourists spent US$ 129 billion in total in 2013, pulling significantly ahead of second place United States, according to UNWTO.
  • 618 million internet users in 2013 amounting to 45.8% overall penetration rate, 500 million of whom access the internet via mobile devices and 90% have at least one social media account, according to China Internet Network Information.
  • No more than one in five citizens have passports, hence, the potential for future growth.

Chinese traveler profile

US$ 1086
average daily spend excluding accommodation.

97%
travel for leisure, 49% for business or education.

67%
prefer to travel independently, not with a tour group.

 

Below is an overall Chinese traveler profile.

  • Mean average daily spend per day when traveling abroad, excluding accommodation: US$ 1086
  • 97% travel for leisure; 49% for business/education
  • 58% stay 2-3 nights, 28% 1 night and 11% 4-6 nights according to hotelier reports.
  • 67% prefer to travel independently, as confirmed by hoteliers surveyed indicating a low of 65% (Europe) to a high of 77% (Asia Pacific) of their Chinese guests now travel independently .

 

Companion types of Chinese traveler Types of companions of Chinese travelers

Chinese traveler lengths of stay at hotels Chinese travelers lengths of stay at individual international hotels

 

How Chinese travelers conduct hotel research

When traveling abroad, Chinese travelers are known to conduct thorough research prior to choosing their destinations, consulting almost five sources of information to help them converge on a final decision. Below is a breakdown of where they gather their research information.

Information sources used by Chinese travelers for their hotel research Information sources used by Chinese travelers for their hotel research

Booking channels

53%
book their hotels online.

17%
book using a mobile app.

12%
book using the hotel telephone.

 

Not only do Chinese travelers conduct their research online, an increasing number of them are doing their booking online as well. Again, the smart phone and its mobile apps are quickly becoming the dominant gateway to the internet.

  • 53% now book their hotels online either on a desktop or via a mobile app, either directly with the hotel or via an online travel company.
  • 17% book their hotel using mobile apps, an almost 300% increase from 2013. The percentage is even higher (22%) among those under 35 of age.
  • Booking through a travel agent has fallen slightly to 34% (20% for under-35s)
  • Only 12% book using a hotel telephone.

 

Below shows a breakdown of the types of accommodation booked by Chinese travelers based on Hotels.com’s worldwide booking data. Rounding out the top three are 3-star hotels (29%), 4-star hotels (28%) and 5-star hotels (17%).

Chinese traveler accommodation types Accommodation types booked by Chinese travelers

 

How foods influence their decisions

95%
have a meal at their hotel restaurant.

73%
rate Chinese foods among most important services offered at a hotel.

No. 2
most important activity when traveling abroad.

 

It is common knowledge that foods play a very important part of their culture for Chinese living at or traveling away from home, as evidenced in the survey results.

  • 95% have a meal at the hotel restaurant on their trip. Both travelers and hoteliers agree that restaurants are where most money is spent.
  • 73% rate the provision of Chinese specific foods as among the most important service offered at a hotel, with 37% voting for room service options and 33% for Chinese breakfast. Note also there is also a strong desire to experience local cuisine among the respondents.
  • Dining is rated the second most important activity when traveling abroad.

 

Important hotel amenities

The hotel amenities most important to Chinese travelers are room service options (57%), followed by onsite restaurant (55%). Not so much for bars (8%), however.

Most import amenities to Chinese hotel guests Hotel amenities considered most important to Chinese travelers.

Important Chinese specific products or services

The majority of the respondents say they are fairly open-minded when it comes to hotels not catering to their specific needs. However, their specific preferences are very much defined where there are choices. Below lists the top 10 most important Chinese specific products or services while staying at a hotel on an international trip, and also how these products or services stack up against their expectations.

 

Most important Service/Product Needs improvement
59% wifi Free Wifi 19%
59% Union Pay China Union Pay / Alipay 27%
50% Chinese staff In-house Mandarin speaking staff 39%
48% Chinese travel guides Translated tour guides 29%
38% Chinese hotel website Hotel website in Chinese
24%
37% Chinese room services Chinese room service options
27%
36% Chinese programs Chinese TV programs
26%
33% Chinese breakfast Chinese breakfast
23%
27% translated welcome materials Translated welcome materials 20%
25% Chinese newspapers Chinese newspapers/magazines
18%
Hotel amenities most important to Chinese guests

 

 

Below are the top five Chinese specific products or services most requested by Chinese travelers on an international trip.

Products most requested by Chinese hotel guests

Products or services most requested by Chinese hotel guests

 

Where Chinese travelers pay the most for accommodations

The following lists the top 10 average hotel prices paid by Chinese travelers in 2013 based on Hotels.com’s Chinese website.

top hotel prices paid by Chinese

Top average hotel prices paid by Chinese travelers by country

Where Chinese are top spenders on accommodations

Based on Hotels.com 2013 internal data, Chinese international travelers were the 7th highest spending nationality on hotel rooms with an average rate of US $169 per room night. They were the top spenders in Australia, Japan, the Netherlands and New Zealand.

Below is the list of countries where Chinese travelers were among the top 10 spenders on accommodations in 2013.

 

Country Position
Australia 1st
Japan 1st
Netherlands 1st
New Zealand 1st
France 2nd
Germany 3rd
Thailand 3rd
Sweden 5th
Singapore 6th
South Korea 6th
Switzerland 6th
Canada 7th
Taiwan 8th
UK 8th
Italy 9th
Denmark 10th
India 10th
Countries where Chinese are top 10 spenders on accommodations

 

The critical role of internet

48%
do their hotel research using online websites.

36%
book a hotel online.

91%
netizens have a social media account.

84%
share their experiences during and after their international trip.

 

A recurring theme of this CITM report is how critical a role internet plays in guiding a Chinese traveler’s decision on choosing accommodations prior to traveling abroad and sharing his/her experiences during and after the trip. In particular, the roles of social media and mobile phones before and after the trip cannot be underestimated. A few highlights:

  • 48% research done using online accommodation/travel websites and 47% using online review sites. These two sources are the most relied upon during the selection phase.
  • 36% use online booking method to reserve a hotel, 17% through a mobile app.
  • 59% rate free WiFi in the hotel as very important; 19% feel that need is not met.
  • 91% of Chinese netizens have at least one social media account.
  • 84% of them share their experiences on social media during and after their international trip (93% among the young).
  • 31% of those aged 35 and under share their experiences on travel review sites.

 

The chart below breaks down how Chinese travelers share their trip experiences.

How Chinese share their trip experiences

How Chinese travelers share their trip experiences

Independent traveler profile

67%
prefer to travel independently.

81%
age 35 and under prefer to travel independently.

US$ 1288
daily spend vs $679 for group tour travelers.

 

One key message from the CITM report is the growing importance of the independent travelers (FIT). The report removes any lingering doubt about the significance or maturity of this segment. The favorable attributes of this segment effectively preordains that going after this segment will be the most critical battleground for the hoteliers.

  • 67% of respondents say they prefer to make their own international travel arrangements. The preference is even more so for younger travelers (81%).
  • FIT travelers have a much higher daily spend (US $1288) compared to group tour travelers ($US 679)
  • They take longer trips (1.5 vs 1.3 week) than group tour travelers.
  • Their trip decisions are influenced by: 19% online review sites, 15% friends and families, 15% online accommodation sites.

There are also different nuances amongst other segments covered by the report, including the under-35s, business travelers, female travelers and shoppers, a topic which will be covered in more detail in future articles. Stay tuned.

 

BRIC Countries Dominated 2013 Outbound Tourism Growth

by

 

Chinese taste for outbound travels continued to grow unabated in 2013 with a whopping 26% increase of $27 billion over the previous year. With 98 million outbound trips and a total spend of US$129 billion, the Chinese consolidated its top dog position, a position they took in 2012, and significantly pulled ahead of Germany ($86.9 billion) and the U.S. ($86.2 billion) which occupied second and third place, according to the United Nations World Tourism Organization (UNWTO).

 

Top tourism spending countries in 2013
Date source:  UNTWO

Chinese tourism spending increased almost tenfold in 13 years since 2000.

Besides China, the emerging countries of Russia and Brazil also took the spotlights on outbound tourism in 2013. The three countries accounted for $40 billion of the $81 billion in total international tourism expenditure growth during last year. Russia edged out the U.K. to take over fourth spot, following a 25% growth to $54 billion. Brazil entered top 10 for the first time on the back of a 13% increase to $25 billion.

(Click to see larger image)

Top tourism spending countries since 2009

Data source: UNWTO

European countries further expedite visa applications

More Chinese tourists are expected in Europe in 2014 as country after country tries to simplify the visa application process for Chinese tourists. 3.47 million Chinese tourists visited Europe in 2013, a 11% increase over 2012.

For example, France, already the top destination among Chinese tourists, slashes the travel document processing time from 10 days to 48 hours and further relaxes where travelers need to go to apply for their visas. The U.K., Belgium and Italy are among other European countries working hard to streamline their visa application processes for Chinese tourists.

FIT travel continued to expand among travelers

2013 witnessed further evidence that FIT travels are increasingly popular for Chinese travelers as they spread out from the most popular tier one destinations, cut down the number of destinations during one’s trip, spend more time in a single destination, and diving deeper into the local cultures.

Theme based tours such as wine tasting events, chateau visits, shopping sprees and honeymoon trips are very popular. In France, for example, it is not uncommon for Chinese visitors to spend one or two weeks in a chateau or a local village.

This evolution in Chinese travel preferences is not surprising, as it follows a very similar trajectory as the ones of the Japanese in the 1980s and Koreans at the turn of the century. The only surprise is the relatively short time it has taken for this trend to unfold and the magnitude of the change compared to the experience from the other two Asian countries.

Sources: UNWTO, Hotel-Online.com, Areppim.com

What the latest Google Room 77 deal means for hotels

by

 

In a move to foray further into the hotel booking business, Google just announced a licensing deal with Room 77, a hotel booking platform which aggregates rates from major online travel agents (OTAs) including Orbitz, Kayak, Expedia and Priceline and allows users to book from those sites or through Room 77.

This latest deal is one in a series of efforts by Google to make itself a serious player in the travel booking industry. Steps taken by Google in the past include its US $770 million acquisition of travel software company ITA several years ago, the introduction of its own Flight Explore and Hotel Finder and the inclusion of Zagat ratings and pricing information in Hotel Finder. Despite such efforts, Google has yet to make a serious dent into the competitive hotel booking business.

That might change. The Room 77 licensing agreement would allow the search engine giant to benefit from not only the extensive hotel database from Room 77 but also its ability to provide in-depth details on specific hotel rooms including the size, layout and amenities inside the rooms.

With the Room 77 addition to its arsenal, Google aims to provide a richer search experience while at the same time getting itself much more closely integrated into the booking process. Google’s move would potentially put itself in competition with the major OTAs which, ironically, are also Google’s biggest advertisers.

What would the new Google hotel search look like?

To see the current Google hotel search features and what they might look like after the Room 77 software has been integrated, let’s use a search on “Los Angeles hotels” as an example.

downtown LA Google hotel search

At the top of the search results are the sponsored ads followed by the top search results – Trip Advisors and Expedia in this case. Below them is a list of downtown L.A. hotels surfed up by Google, each of which comes with Google reviews and a room price. Mousing over the room price would cause the detailed hotel info to appear in the right hand column, and clicking the same room price would result in a popup/dropdown containing check-in and check-out date input fields and a set of links from booking sites. More importantly, it also includes a link to the website of the hotel itself.

What it means to hotel operators

By further integrating reviews, room rates and booking details into their search results, Google is trying to carve out a bigger role for itself in travelers’ searching and planning for accommodations. By making a more visible path for travelers to book through the hotels’ websites directly, it is providing hoteliers a smoother booking path as an additional alternative to the traditional online booking sites which charge commission of up to 25%.

Hotel operators might want to re-evaluate their Google click ads strategy as the integration of travel search and hotel booking further develops as a result of the Room 77 deal.

Thanks to Google’s effort in bringing hotels closer to their potential booking customers through its search engine, it is also imperative upon hotel operators to strengthen ways to engage potential customers whose preferred language is not English.

downtown Vancouver Google hotel search in Chinese

As an example, a search on “Vancouver downtown hotels” in Chinese shows Shangri-la Hotel prominently, even higher than booking site heavyweights such as Agoda, Trip Advisor/Daodao and Booking.com.  Again, displayed also on the first page is the list of downtown hotels by Google.  From there, clicking through to the hotel website with a choice of the visitors’ language would substantially enhance their experience and the chance of closing the deal for the hotel.

By the numbers

Below are some context background data.

  • Lodging revenue was US $208 billion in the U.S. in 2010, according to the U.S. Commerce Department. An estimated 31% of U.S. hotel reservations were made online (PhoCusWright).
  • The top 5 search sites on Google Adwords in the travel category are, in order, Kayak, Priceline, Orbitz, Trip Advisor and Cheapoair.
  • Priceline Group and Expedia will likely spend $1.5 and $1 billion, respectively, on Google advertising, together accounting for up to 5% of Google’s ad revenue in 2014, according to RBC Capital Markets.

 

Sources: Wall Street Journal, Search Engine Land, Google Inside Search

 

Chinese cross border shopping, without crossing borders

by

 

Stories of conspicuous consumption (see also China spends more on luxury items than Europe and the U.S. combined and Nearly 1 in 3 Chinese tourists to U.S. stops in L.A., sho pping spree as highlight ) by Chinese shoppers while traveling overseas should not be anything new to anyone who has more than a casual interest in this topic. In case there are any lingering doubts, perhaps the following factoids should cleanse any cloudy thoughts and put the opportunity in proper focus:

  • China is the world’s second largest consumer market for luxury goods after surpassing the US in 2009. It is expected to be the world’s largest luxury good market within this decade and is expected to take over top spot from Japan in 2014.
  • By 2015, women in China are expected to account for 55% of the $9 billion luxury goods market.
  • The Chinese are by far number one for shopping in France. In 2011, they represented only 1.5% of foreign arrivals, but accounted for 25% of untaxed purchases in France according to Global Blue.
  • Chinese tourists account for 30 percent of the luxury goods market in the U.K., followed by Russians, Arabs and Japanese, with British making up only 15% of the market.

Anecdotal reports from shopping Meccas in different parts of the world provide further evidence that this phenomenon continues unabated. Take, for example, London. Chinese shoppers spent an average US$12,800 there during the week long National Holiday just passed.

Traditionally and historically, cross border shopping, whether in China’s next door neighbor cities such as Hong Kong and Seoul or long haul destinations such as Paris and Milan, is done the good old fashioned way, that is, with boots (well, more like runners or high heels) on the ground, literally.

A policy change in 2013 makes it much more convenient for Chinese citizens to make purchases on overseas websites without having to worry about dual currency credit card issues.

While Chinese shoppers account for close to 30 percent of the world’s luxury spending, according to the latest China Luxury Market Study by Bain, sales within China account for just 7 percent. This means that most of such luxury purchases are done overseas. Imagine the size of the potential cross border shoppers and the opportunities they bring to major brands larger or small, if these cross border shoppers can shop without, well, crossing the border.

A couple of channels exist to facilitate online cross border shopping. Daigou, the home grown phenomenon of China buying agents, has been very popular among Chinese in recent years and allows China’s citizens to purchase brand items online directly from overseas. Major brands have also been setting up direct online outlets to reach these consumers.

Recent policy change

A policy change by the China State Administration of Foreign Exchange in 2013 will further fuel the rapid growth in overseas online purchases.  By allowing third party payment platforms to offer cross border consignments, the change makes it much more convenient for domestic consumers to make purchases on international websites using these third party payment platforms without having to worry about dual currency credit card issues.

This loosening of regulations will give an extra boost to the already red hot e-commerce landscape in China. China’s e-commerce revenue hit $212 billion in 2012 and is set to overtake the U.S. as the largest e-commerce market in the world in 2013.

For international brands hoping to extend their footprints via their online stores, this change in the e-commerce environment presents a new market opportunity too huge to ignore.

Daigou websites

Daigou website

Agentchinese.net Daigou online store

Daigou (代购, meaning purchasing on someone’s behalf) channels arose to take advantage of the price and selection gaps between consumer products which are available overseas and those offered by the same brands domestically.

To make a purchase, a consumer visits a Daigou website, browses and selects the desired items and makes a purchase. Once the payment is made, Daigou agents then make the purchase overseas and ship the purchased items to the buyer.

There are no fewer than 50 such Daigou online outlets out there, and new ones seem to be popping up regularly. Some websites carry products from all over the world, whereas some are more restricted to a region (e.g. North America) or a particular country. Popular products on these websites include apparels, cosmetics, handbags and food items such as baby formula.

The Daigou market was estimated to be worth RMB 24 billion (roughly US$ 4 billion) in 2011. The market has continued to grow since this last figure was available. However, this industry has also been subject to more intense scrutiny by the regulators who are trying to prevent illegal imports. Popular items such as iPads and baby formula are getting a lot more expensive to import due to customs crackdown.

Brand online stores

More and more forward looking brands are extending their footprint via online stores in order to reach consumers in China and other emerging markets. The policy change in 2013 allowing Chinese citizens to purchase products from international websites using domestic third-party payment platforms will serve as a catalyst for this B2C channel to explode and presents a golden opportunity for foreign brands to establish a direct path with the end consumers.

Different retailers are solving the logistics of payment and fulfillment differently.

 

Gap online outlet on Tmall.com

Gap on Tmall.com

Zara operates its Chinese website on its own and handles orders from China directly from its Spanish headquarters with the help of third party experts who help monitor its global logistics system.

Uniglo, on the other hand, works with Alibaba, the most popular online marketplace in China. When an order is placed, the customer is directed to the retailer’s custom page on Alibaba where transactions and deliveries are fulfilled through Alibbaba’s Taobao channel.

Gap, meanwhile, adopts a hybrid model somewhere in between the approaches used by Zara and Uniglo by having a storefront on Tmall.com which is also a platform of Alibaba designed for brands to establish a direct channel to their consumers.

What this all means

The liberalization of international payment handling in China means national borders no longer present a significant barrier to businesses trying to connect to the Chinese consumers. In order to take advantage of this opportunity, it is imperative upon the businesses to establish their presence and build their brands through storytelling and social media so that these consumer travelers are connected with and look for these brands while traveling – or not.

Similarly, the same opportunity also applies to operators and others in the travel and hospitality industries.

Sources: China Daily , 360Baike , TechInAsia

5 Trends In Outbound China Travel Market in 2014

by

 

As businesses in the travel industry have closed their books for 2013 and start to make plans for 2014, industry analysts and pundits alike are pondering over the year that has just transpired, particularly as it relates to the Chinese outbound travel market. For sure, 2013 has been a notable year again for the Chinese overseas travelers. But, more importantly, what lies ahead for this tsunami of travelers in 2014, and, as usual, the perpetual question – is the trend going to last?

Chinese outbound tourists

*2013 estimate

While the official statistics for the entire year are still being tallied up, the numbers based on the first three quarters of last year are pointing to the expected growth trend. The total outbound overseas Chinese travelers are projected to grow by 18% over the year before to 98 million, according to a recent report released by the China Tourism Academy. The same report projected the total dollar amount spent at US$118 billion, smashing yet another previous record of $102 billion established in 2012 which propelled China to the top spot, edging out Germany and U.S. (see $102 Billion – China takes global outbound tourist spenders top spot ).

The continued outpour of Chinese overseas travelers is not a unique trend within the Chinese travel theme. Domestically, the Chinese had also been on the move. An estimated 3.3 billion tourists traveled and spent $430 billion within China’s borders in the past year. Little wonder every step along the Great Wall was filled with people and highways turning into kilometers of parking lots during peak tourist seasons inside the country.

As for the upcoming year, the China Tourism Academy, among other industry experts, is predicting another year of growth in the mid-teens (16% – 18%) for the Chinese outbound market. The prediction would put the total number of outbound travelers to solidly beyond the 100-million milestone.

While no drastic change of course is expected in 2014, barring any black swan event knocking over the apple cart otherwise known as the New Normal global economy, our crystal ball is offering the following five evolutions to watch out for.

1.    Continued expansion of the free independent travelers (FIT)

The first prediction is an easy one. As more and more Chinese having already traveled overseas return for more trips, these repeat travelers are more confident than ever and willing to venture beyond what they had experienced in their first trips. If the evolution of the Japanese tourists in the ‘80s and that of the Koreans in the ‘90s are any indication, the size of the independent Chinese travelers will continue to expand. The only difference with the Chinese is the time scale (much more compressed) and magnitude of the numbers involved relative to the two other Asian groups before them.

Another factor causing this trend to accelerate is the new travel regulations which came into effect last year. The law forbids the sale of below-cost tour packages – a common practice by many domestic travel agencies who herd their group tourists through designated shopping outlets from which they earn commission to offset the cost of the trips. The side effect of this new regulation is reflation of package tour prices, in the process eroding the perceived economic advantage of package tours and further tilting the price-value equation in favor of FIT packages.

2.    Going deeper and narrower

Whereas the bragging rights for the travelers back a few years ago used to be doing selfies in front of iconic symbols such as the Eiffel Tower or Coliseum, what is cool now might be having themselves and a group of buddies being helicoptered to the top of a pristine mountain to have lunch on a glacier, or a luxury boat and cycling tour along the Rhine where they stay in castles and vineyards along the route.

What this means is that the pace of their trips will slow down.  Instead of five cities in seven days, the number of destinations might narrow to one or two, allowing them to smell the flowers, so to speak, along the way. Complementing the must-see’s at destinations, more and more time will be spent on theme based activities which better reflect an individual’s tastes and desires for certain types of immersive experience. Multi-day cycling tours, museum tours, hikes along famous trails and other participatory itineraries will become increasingly popular and sought after.

3.    Spreading beyond tier-one destinations

As a group, the ‘been-there-done-that’ repeat overseas tourists are younger, better educated, more affluent, and are eager to venture beyond the standard tourist traps at tier-one destinations. The direct beneficiaries of this emerging trend are the tier-two and tier-three countries and destinations which have been so far left out by the first wave of Chinese tourists.

By definition, non-tier-one destinations are lesser known as less information about them is available. Such is especially true for the amount of information in Chinese. Therefore, the first challenge for these destinations is to raise their profiles so that they are part of the Chinese travelers’ vocabulary and appear as markers on their travel maps.

Along with prediction #2, these two trends will point to further diversification and fragmentation of the travel segment, and which leads us to our next prediction.

4.    Intensified competition among destinations

The expanding FIT travel segment, increased sophistication and maturity of the repeat travelers, and continued diversification of vertical travel themes all mean that destination marketing organizations (DMOs) will need to innovate in order to capitalize on these emerging trends. Amongst the DMOs and industry participants, the next battle will be waged trying to win the hearts and minds of the FIT travelers, the prize of which will be better margins over those from packaged tours as well as economic benefits distributed more evenly across regions.

As most commonly known in the high tech industry, being early and on the bleeding edge of innovation can be detrimental to one’s wallet. On the other hand, being late to the game often means fighting over crumbs amongst many other me-too’s.

Destinations late in catching the initial Chinese trend will be fighting in an increasingly competitive landscape trying to position themselves for the next wave of FIT tourists. Some of them might still be weighing the pros and cons of the first wave of Chinese tourists arriving in tour buses on margin-challenged tour packages and wonder if the market is sustainable or worth going after. In the meantime their more innovative and forward looking counterparts are busy marketing themselves to the next wave of FIT travelers whose experience and preference for luxury occupy significant weights in their travel budget calculus.

2014 will witness further widening of the gaps between the have and have-not destinations and individual operators.

5.    Increased sophistication of social media marketing

It is well known that the rate of internet user participation is high in China and social media plays an important role when Chinese travelers do their travel research. If these two factoids fail to convince you, the fact that a staggering 91% of Chinese respondents indicated they interacted with social media on their travels, according to a study by hospitality company Accor Hotels, should remove any lingering doubts that social media should be a vital part of your Chinese marketing strategy.

2013 is also the year when WeChat matured from puberty into an 800 pound gorilla. With 500 million users and 90%+ Chinese mobile users having this app installed on their smart phones (incidently, China outsold the U.S. in smart phones last year; another first), WeChat has gone beyond its messaging root and morphed into a full blown one-to-one social network, mobile payment system, social CRM and online-to-offline platform.

The jury is still out on exactly how dominant WeChat will be and exactly what roles it will play, as the platform and its ecosystem of apps are still evolving and mutating at a breakneck pace. The fact that WeChat will be a dominant gateway to mobile internet and a major social media force, however, is now clear and undisputed.

Microblogging, or Weibo, on the other hand, will see its growth moderated, now that it has to share the social media space with WeChat. Does it mean Weibo will fall out of favor any time soon? Not likely. Taper? Maybe.

The question of WeChat replacing Weibo is not quite a valid one as the different nature of the two platforms means that they are designed for different purposes. In fact, social media strategies using both platforms in an integrated and orchestrated manner has been a hot topic in 2013 and will continue to be one this year.

 

Sources: China Daily , Skift Want China Times , Forbes

China to Surpass U.S. in Business Travel Spending by 2016

by

Beijing International AirportWith China slowly but surely displacing the United States for top spots in many aspects, from the biggest outbound travel country, biggest auto manufacturer to biggest consumer of oil to name a few, another likely top position to be overtaken by China looks to be business travel spending.

According to trade group Global Business Travel Association, business travel from China is expected to jump 14% in 2013 and 17% next year. Based on this trajectory, the country will outspend the U.S. by 2016.

With the growth in travel in and out of the China, the Beijing International Airport is expected to surpass Hartsfield-Jackson Atlanta International Airport as the world’s busiest airport. In fact, the demand for air travel from China is expected to grow so fast in the next few years that several of China’s airports have had to double or triple their capacity and the nation plans to build about 100 new airports over the next decade, said Joe Bates, vice president of research at GBTA.

The GBTA report also predicts that robust growth in developing countries throughout Asia and Latin America will “permanently” reshape the travel landscape. The majority of the travel traffic is predicted to stay in their respective regions.

The world’s top five business travel regions at a glance.

Country Amount (billion USD) YoY Growth
United States $262 1.7%
China $196 13.2%
Japan $65.2 -1.2%
Germany $50.5 1.1%
United Kingdom $40.2 0%

 

Sources: LA Times , Foxbusiness.com

Space needed

by

No, Lady Gaga did not come to town. Rather, it is just a garden variety Oct 1 Chinese national holiday in the famous Bund district  in Shanghai. One can appreciate the desire of so many wanting to get away to somewhere more quiet.

Shanghai during the Oct 1 national holiday

 

Well, it does not have to be like this.

wilderness

image: arthistory327.wordpress.com

 

But somewhere in between with a bit of space would be great.

Copyright © 2015 Chichaku Corporation. All rights reserved.